**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

** **

**FORM 10-Q**

** **

**x****QUARTERLY REPORT PURSUANT TO SECTION 13OR 15(d)**

**OF THE SECURITIES EXCHANGE ACT OF 1934**

** **

**For thequarterly period ended September 30, 2008**

** **

**OR**

** **

**o****TRANSITION REPORT PURSUANT TO SECTION 13OR 15(d)**

**OF THE SECURITIES EXCHANGE ACT OF 1934**

** **

**for thetransition period from                 to                **

** **

**CommissionFile Number 001-15253**

 

 

**Janus Capital Group Inc.**

(Exact name of registrant asspecified in its charter)

 

| **Delaware**                              | ** ** | **43-1804048**       |
|-------------------------------------------|------------|----------------------|
| (State or  other jurisdiction of          |       | (I.R.S.  Employer    |
| incorporation  or organization)           |       | Identification  No.) |
|                                      |       |                 |
| **151  Detroit Street, Denver, Colorado** | ** ** | **80206**            |
| (Address of  principal executive offices) |       | (Zip Code)           |

 

**(303) 333-3863**

(Registrant’s telephone number, includingarea code)

 

**Not applicable**

(Former name, former address and formerfiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed allreports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the Company was required to file such reports), and (2) has beensubject to the filing requirements for at least the past 90 days.

Yes x               Noo

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company.  See the definitions of “large acceleratedfiler,” “accelerated filer,” “non-accelerated filer” and “smaller reportingcompany” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer x            AcceleratedFiler o            Non-AcceleratedFiler o            SmallerReporting Company o

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).

Yes o               Nox

 

As of October 17, 2008,there were 157,853,879, shares of the Company’s common stock, $.01 par valueper share, issued and outstanding.

 

 

 

----

 

**PART I - FINANCIAL INFORMATION**

**Item 1. Financial Statements**

 

**JANUS CAPITAL GROUP INC.**

** **

**CONSOLIDATED BALANCE SHEETS (UNAUDITED)**

**(Dollars in Millions)**

 
| ** **                                      | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                      | ** ** | **2008**               | ** ** | **2007**              | ** ** |
| **ASSETS**                                      |       |                   |       |                  |       |
| **Current assets:**                             |       |                   |       |                  |       |
| Cash and cash equivalents                       |       | $ 297.6           |       | $ 480.7          |       |
| Marketable securities                           |       | 168.7                  |       | 210.7                 |       |
| Accounts receivable                             |       | 136.1                  |       | 164.5                 |       |
| Income taxes receivable                         |       | 32.0                   |       | 5.9                   |       |
| Other current assets                            |       | 59.7                   |       | 62.3                  |       |
| Assets related to discontinued operations       |       | 5.9                    |       | 29.8                  |       |
| Total current assets                            |       | 700.0                  |       | 953.9                 |       |
|                                            |       |                   |       |                  |       |
| **Other assets:**                               |       |                   |       |                  |       |
| Other assets                                    |       | 109.8                  |       | 112.2                 |       |
| Property and equipment, net                     |       | 49.5                   |       | 46.5                  |       |
| Intangibles, net                                |       | 1,324.6                |       | 1,310.4               |       |
| Goodwill                                        |       | 1,184.2                |       | 1,141.1               |       |
|                                            |       |                   |       |                  |       |
| Total assets                                    |       | $ 3,368.1         |       | $ 3,564.1        |       |
|                                            |       |                   |       |                  |       |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**   |       |                   |       |                  |       |
|                                            |       |                   |       |                  |       |
| **Current liabilities:**                        |       |                   |       |                  |       |
| Accounts payable                                |       | $ 0.5             |       | $ 2.2            |       |
| Accrued compensation and benefits               |       | 92.6                   |       | 134.5                 |       |
| Current portion of long-term debt               |       | 22.0                   |       | —                |       |
| Other accrued liabilities                       |       | 59.7                   |       | 79.2                  |       |
| Liabilities related to discontinued  operations |       | 3.5                    |       | 10.8                  |       |
| Total current liabilities                       |       | 178.3                  |       | 226.7                 |       |
|                                            |       |                   |       |                  |       |
| **Other liabilities:**                          |       |                   |       |                  |       |
| Long-term debt                                  |       | 1,105.9                |       | 1,127.7               |       |
| Deferred income taxes                           |       | 402.3                  |       | 404.3                 |       |
| Other liabilities                               |       | 62.2                   |       | 65.7                  |       |
| Total liabilities                               |       | 1,748.7                |       | 1,824.4               |       |
|                                            |       |                   |       |                  |       |
| Commitments and contingencies                   |       |                   |       |                  |       |
|                                            |       |                   |       |                  |       |
| Minority interest                               |       | 15.2                   |       | 16.2                  |       |
|                                            |       |                   |       |                  |       |
| **STOCKHOLDERS’ EQUITY**                   |       |                   |       |                  |       |
|                                            |       |                   |       |                  |       |
| Preferred stock                                 |       | —                 |       | —                |       |
| Common stock                                    |       | 1.6                    |       | 1.7                   |       |
| Retained earnings                               |       | 1,600.6                |       | 1,717.0               |       |
| Accumulated other comprehensive income          |       | 2.0                    |       | 4.8                   |       |
| Total stockholders’ equity                 |       | 1,604.2                |       | 1,723.5               |       |
|                                            |       |                   |       |                  |       |
| Total liabilities and stockholders’ equity |       | $ 3,368.1         |       | $ 3,564.1        |       |

 

The accompanying notes are an integral partof these consolidated financial statements.

 

1

----

 

**JANUSCAPITAL GROUP INC.**

 

**CONSOLIDATEDSTATEMENTS OF INCOME (UNAUDITED)**

**(Dollars inMillions, Except Per Share Data)**

 
| ** **                                                  | ** ** | **Three months ended** | ** ** | **Nine months ended** | ** ** |
|-------------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                                  | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **                                                  | ** ** | **2008**                         | ** ** | **2007**                        | ** ** | **2008** | ** ** | **2007** | ** ** |
|                                                        |       |                             |       |                            |       |   |   |   |   |
| **Revenues:**                                               |       |                             |       |                            |       |   |   |   |   |
| Investment management fees                                  |       | $ 218.9                     |       | $ 228.5                    |       | $ 684.2 |   | $ 650.0 |   |
| Performance fees                                            |       | 8.8                              |       | 5.1                             |       | 26.0 |   | 11.4 |   |
| Shareowner servicing fees and other                         |       | 47.7                             |       | 51.0                            |       | 150.6 |   | 144.1 |   |
| Total                                                       |       | 275.4                            |       | 284.6                           |       | 860.8 |   | 805.5 |   |
|                                                        |       |                             |       |                            |       |   |   |   |   |
| **Operating Expenses:**                                     |       |                             |       |                            |       |   |   |   |   |
| Employee compensation and benefits                          |       | 81.2                             |       | 91.1                            |       | 264.6 |   | 265.3 |   |
| Long-term incentive compensation                            |       | 10.7                             |       | 13.8                            |       | 35.3 |   | 49.5 |   |
| Marketing and advertising                                   |       | 8.0                              |       | 6.5                             |       | 24.5 |   | 16.6 |   |
| Distribution                                                |       | 36.5                             |       | 35.4                            |       | 111.0 |   | 100.5 |   |
| Depreciation and amortization                               |       | 10.1                             |       | 8.9                             |       | 30.7 |   | 24.7 |   |
| General, administrative and occupancy                       |       | 35.6                             |       | 33.1                            |       | 106.8 |   | 89.8 |   |
| Total                                                       |       | 182.1                            |       | 188.8                           |       | 572.9 |   | 546.4 |   |
|                                                        |       |                             |       |                            |       |   |   |   |   |
| **Operating Income**                                        |       | 93.3                             |       | 95.8                            |       | 287.9 |   | 259.1 |   |
|                                                        |       |                             |       |                            |       |   |   |   |   |
| Interest expense                                            |       | (18.9                            | )          | (18.9                           | )          | (56.6 | ) | (39.9 | ) |
| Investment gains (losses), net                              |       | (32.3                            | )          | 0.5                             |       | (38.8 | ) | 1.7 |   |
| Other income, net                                           |       | 1.4                              |       | 8.4                             |       | 6.6 |   | 18.6 |   |
| Income before taxes, equity earnings and  minority interest |       | 43.5                             |       | 85.8                            |       | 199.1 |   | 239.5 |   |
|                                                        |       |                             |       |                            |       |   |   |   |   |
| Income tax provision                                        |       | (17.2                            | )          | (32.0                           | )          | (65.5 | ) | (88.3 | ) |
| Equity in earnings of unconsolidated  affiliate             |       | 2.5                              |       | 1.9                             |       | 6.8 |   | 5.3 |   |
| Minority interest in consolidated earnings                  |       | (2.8                             | )          | (4.9                            | )          | (9.8 | ) | (16.1 | ) |
| Income from continuing operations                           |       | 26.0                             |       | 50.8                            |       | 130.6 |   | 140.4 |   |
|                                                        |       |                             |       |                            |       |   |   |   |   |
| Loss from discontinued operations                           |       | (0.6                             | )          | (38.6                           | )          | (1.5 | ) | (43.8 | ) |
|                                                        |       |                             |       |                            |       |   |   |   |   |
| **Net Income**                                              |       | $ 25.4                      |       | $ 12.2                     |       | $ 129.1 |   | $ 96.6 |   |
|                                                        |       |                             |       |                            |       |   |   |   |   |
| **Earnings per Share-Basic:**                               |       |                             |       |                            |       |   |   |   |   |
| Income from continuing operations                           |       | $ 0.17                      |       | $ 0.30                     |       | $ 0.82 |   | $ 0.78 |   |
| Loss from discontinued operations                           |       | —                           |       | (0.23                           | )          | (0.01 | ) | (0.24 | ) |
| Net income                                                  |       | $ 0.17                      |       | $ 0.07                     |       | $ 0.81 |   | $ 0.54 |   |
|                                                        |       |                             |       |                            |       |   |   |   |   |
| **Earnings per Share-Diluted:**                             |       |                             |       |                            |       |   |   |   |   |
| Income from continuing operations                           |       | $ 0.16                      |       | $ 0.29                     |       | $ 0.80 |   | $ 0.77 |   |
| Loss from discontinued operations                           |       | —                           |       | (0.22                           | )          | (0.01 | ) | (0.24 | ) |
| Net income                                                  |       | $ 0.16                      |       | $ 0.07                     |       | $ 0.79 |   | $ 0.53 |   |

 

The accompanying notes are an integral partof these consolidated financial statements.

 

2

----

 

**JANUS CAPITAL GROUP INC.**

** **

**CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)**

**(Dollars in Millions)**

** **
| ** **                                                   | ** ** | **Nine months ended** | ** ** |
|--------------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                   | ** ** | **September 30,**          | ** ** |
| ** **                                                   | ** ** | **2008**                        | ** ** | **2007** | ** ** |
| **CASH FLOWS PROVIDED BY (USED FOR):**                       |       |                            |       |   |   |
| **Continuing Operations**                                    |       |                            |       |   |   |
| **Operating Activities:**                                    |       |                            |       |   |   |
| Net income from continuing operations                        |       | $ 130.6                    |       | $ 140.4 |   |
| Adjustments to net income:                                   |       |                            |       |   |   |
| Depreciation and amortization                                |       | 30.7                            |       | 24.7 |   |
| Deferred income taxes                                        |       | (8.9                            | )          | 27.0 |   |
| Minority interest in consolidated earnings                   |       | 9.8                             |       | 16.1 |   |
| Amortization of stock-based compensation                     |       | 25.3                            |       | 33.0 |   |
| Investment gains (losses), net                               |       | 38.8                            |       | (0.4 | ) |
| Payment of deferred commissions, net                         |       | (2.2                            | )          | (26.2 | ) |
| Other, net                                                   |       | 4.4                             |       | (5.5 | ) |
| Changes in working capital items:                            |       |                            |       |   |   |
| Accounts receivable                                          |       | 28.4                            |       | (13.7 | ) |
| Other current assets                                         |       | (26.6                           | )          | (3.0 | ) |
| Accounts payable and accrued compensation  payable           |       | (46.3                           | )          | (3.5 | ) |
| Other accrued liabilities                                    |       | (15.9                           | )          | 14.9 |   |
| Net operating                                                |       | 168.1                           |       | 203.8 |   |
|                                                         |       |                            |       |   |   |
| **Investing Activities:**                                    |       |                            |       |   |   |
| Purchase of property and equipment                           |       | (14.1                           | )          | (13.6 | ) |
| Acquisitions of INTECH                                       |       | (67.7                           | )          | (81.0 | ) |
| Purchase of marketable securities                            |       | (63.7                           | )          | (62.0 | ) |
| Proceeds from sales and maturities of  marketable securities |       | 65.8                            |       | 120.4 |   |
| Distribution of cash from discontinued  operations           |       | 13.5                            |       | — |   |
| Net investing                                                |       | (66.2                           | )          | (36.2 | ) |
|                                                         |       |                            |       |   |   |
| **Financing Activities:**                                    |       |                            |       |   |   |
| Proceeds from issuance of long-term debt                     |       | —                          |       | 748.4 |   |
| Debt issuance costs                                          |       | —                          |       | (6.9 | ) |
| Repayment of long-term debt                                  |       | —                          |       | (158.1 | ) |
| Proceeds from stock plans                                    |       | 21.5                            |       | 51.4 |   |
| Excess tax benefit from equity-based  compensation           |       | 4.4                             |       | 5.3 |   |
| Repurchase of common stock                                   |       | (289.8                          | )          | (675.6 | ) |
| Distributions to minority interest                           |       | (14.6                           | )          | (26.6 | ) |
| Dividends paid to shareholders                               |       | (6.5                            | )          | (7.2 | ) |
| Net financing                                                |       | (285.0                          | )          | (69.3 | ) |
|                                                         |       |                            |       |   |   |
| **Cash and Cash Equivalents:**                               |       |                            |       |   |   |
| Net increase (decrease)                                      |       | (183.1                          | )          | 98.3 |   |
| At beginning of period                                       |       | 480.7                           |       | 507.1 |   |
| At end of period                                             |       | $ 297.6                    |       | $ 605.4 |   |
|                                                         |       |                            |       |   |   |
| **Discontinued Operations:**                                 |       |                            |       |   |   |
| Operating activities                                         |       | $ (5.0                     | )          | $ (1.8 | ) |
| Investing activities                                         |       | 2.8                             |       | (1.4 | ) |
| Net decrease                                                 |       | (2.2                            | )          | (3.2 | ) |
| Cash at beginning of period                                  |       | 4.3                             |       | 52.6 |   |
| Cash at end of period                                        |       | $ 2.1                      |       | $ 49.4 |   |
|                                                         |       |                            |       |   |   |
| **Supplemental Cash Flow Information:**                      |       |                            |       |   |   |
| Cash paid for interest                                       |       | $ 44.0                     |       | $ 27.6 |   |
| Cash paid for income taxes                                   |       | $ 94.1                     |       | $ 51.2 |   |

 

The accompanying notes are an integral partof these consolidated financial statements.

 

3

----

 

**JANUS CAPITAL GROUP INC.**

** **

**CONSOLIDATED STATEMENTS OF CHANGES INSTOCKHOLDERS’ EQUITY (UNAUDITED)**

**(Amounts in Millions, Except Per Share Data)**

 
| ** **                                                                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     | ** ** | **Accumulated**   | ** ** | ** **             | ** ** |
|------------------------------------------------------------------------------|------------|------------|------------|------------|------------|----------------|------------|-------------------|------------|------------------------|------------|
| ** **                                                                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     | ** ** | **Other**         | ** ** | **Total**              | ** ** |
| ** **                                                                   | ** ** | ** ** | ** ** | **Common** | ** ** | **Retained**   | ** ** | **Comprehensive** | ** ** | **Stockholders’** | ** ** |
| ** **                                                                   | ** ** | **Shares** | ** ** | **Stock**  | ** ** | **Earnings**   | ** ** | **Income**        | ** ** | **Equity**             | ** ** |
|                                                                         |       |       |       |       |       |           |       |              |       |                   |       |
| **Balance at December 31, 2006**                                        |       | 193.5      |       | $ 1.9 |       | $ 2,293.4 |       | $ 11.1       |       | $ 2,306.4         |       |
|                                                                         |       |       |       |       |       |           |       |              |       |                   |       |
| Cumulative-effect adjustment for the adoption  of a new accounting principle |       |       |       |       |       | 29.9           |       |              |       | 29.9                   |       |
| Net income                                                                   |       |       |       |       |       | 116.3          |       |              |       | 116.3                  |       |
| Net unrealized gain on marketable  securities                                |       |       |       |       |       |           |       | 5.2               |       | 5.2                    |       |
| Amortization of net loss on cash flow hedge                                  |       |       |       |       |       |           |       | 0.4               |       | 0.4                    |       |
| Reclassification for net gains included in  net income                       |       |       |       |       |       |           |       | (12.8             | )          | (12.8                  | )          |
| Foreign currency translation adjustment                                      |       |       |       |       |       |           |       | 0.9               |       | 0.9                    |       |
| *Comprehensive income*                                                       |       |       |       |       |       |           |       |              |       | 110.0                  |       |
| Amortization of stock-based compensation                                     |       |       |       |       |       | 50.1           |       |              |       | 50.1                   |       |
| Issuance and forfeitures of restricted  stock awards                         |       | 0.9        |       |       |       |           |       |              |       | —                 |       |
| Tax impact of stock-based compensation                                       |       |       |       |       |       | 6.7            |       |              |       | 6.7                    |       |
| Stock option exercises                                                       |       | 4.2        |       |       |       | 73.2           |       |              |       | 73.2                   |       |
| Common stock repurchased                                                     |       | (32.3      | )          | (0.2       | )          | (845.4         | )          |              |       | (845.6                 | )          |
| Common stock dividends ($0.04 per share)                                     |       |       |       |       |       | (7.2           | )          |              |       | (7.2                   | )          |
| **Balance at December 31, 2007**                                        |       | 166.3      |       | 1.7        |       | 1,717.0        |       | 4.8               |       | 1,723.5                |       |
|                                                                         |       |       |       |       |       |           |       |              |       |                   |       |
| Net income                                                                   |       |       |       |       |       | 129.1          |       |              |       | 129.1                  |       |
| Net unrealized gain on marketable  securities                                |       |       |       |       |       |           |       | 0.9               |       | 0.9                    |       |
| Reclassification for net gains included in  net income                       |       |       |       |       |       |           |       | (1.0              | )          | (1.0                   | )          |
| Amortization of net loss on cash flow hedge                                  |       |       |       |       |       |           |       | 0.4               |       | 0.4                    |       |
| Foreign currency translation adjustment                                      |       |       |       |       |       |           |       | (3.1              | )          | (3.1                   | )          |
| *Comprehensive income*                                                       |       |       |       |       |       |           |       |              |       | 126.3                  |       |
| Amortization of stock-based compensation                                     |       |       |       |       |       | 23.8           |       |              |       | 23.8                   |       |
| Issuance and forfeitures of restricted  stock awards                         |       | 1.6        |       |       |       |           |       |              |       | —                 |       |
| Tax impact of stock-based compensation                                       |       |       |       |       |       | 3.9            |       |              |       | 3.9                    |       |
| Stock option exercises                                                       |       | 1.1        |       |       |       | 21.5           |       |              |       | 21.5                   |       |
| Common stock repurchased                                                     |       | (11.1      | )          | (0.1       | )          | (289.7         | )          |              |       | (289.8                 | )          |
| Change of interest in subsidiary                                             |       |       |       |       |       | 1.5            |       |              |       | 1.5                    |       |
| Common stock dividends ($0.04 per share)                                     |       |       |       |       |       | (6.5           | )          |              |       | (6.5                   | )          |
| **Balance at September 30, 2008**                                       |       | 157.9      |       | $ 1.6 |       | $ 1,600.6 |       | $ 2.0        |       | $ 1,604.2         |       |

 

The accompanying notes are an integral partof these consolidated financial statements.

 

4

----

 

**JANUS CAPITAL GROUP INC.**

 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

***(Unaudited)***

 

**Note 1 –Basis of Presentation**

 

Inthe opinion of Janus Capital Group Inc. (collectively, “Janus” or the “Company”)management, the accompanying unaudited interim consolidated financialstatements contain all adjustments necessary to fairly present the financialposition, results of operations and cash flows of the Company in accordancewith accounting principles generally accepted in the United States of America (“GAAP”).  All such adjustments are of a normalrecurring nature.  Such unaudited interimfinancial statements have been prepared in accordance with the instructions to Form 10-Qpursuant to the rules and regulations of the Securities and ExchangeCommission (“SEC”).  Certain informationand footnote disclosures normally included in financial statements prepared inaccordance with GAAP have been condensed or omitted pursuant to such rules andregulations.  These consolidatedfinancial statements should be read in conjunction with the Company’s AnnualReport on Form 10-K for the year ended December 31, 2007.

 

Theaccompanying consolidated financial statements have been prepared on aconsistent basis with the accounting policies described in Note 2 to theconsolidated financial statements that are presented in the Company’s AnnualReport on Form 10-K for the year ended December 31, 2007.

 

**Note 2 –Recent Accounting Pronouncements**

 

In December 2007,the Financial Accounting Standards Board (“FASB”) issued Statement of FinancialAccounting Standard No. 141 (revised 2007), “Business Combinations” (“SFAS141R”), which establishes principles and requirements for how an acquirerrecognizes and measures the identifiable assets acquired, the liabilitiesassumed and any noncontrolling interest in an acquiree, including therecognition and measurement of goodwill acquired in a businesscombination.  The effective date of SFAS141R is the Company’s fiscal year beginning January 1, 2009.  Janus will apply SFAS 141R to any futureacquisitions completed on or after January 1, 2009.

 

In December 2007,the FASB issued Statement of Financial Accounting Standard No. 160, “NoncontrollingInterests in Consolidated Financial Statements, an amendment of AccountingResearch Bulletin No. 51” (“SFAS 160”), which establishes accounting andreporting standards for the noncontrolling interest in a subsidiary, andrequires noncontrolling interests to be classified as a component of equity inthe consolidated financial statements. The effective date of SFAS 160 is the Company’s fiscal year beginning January 1,2009.  Subsequently, the SEC announcedrevisions to Emerging Issues Task Force Topic D-98 “Classification andMeasurement of Redeemable Securities” (“EITF D-98”) which clarified thatnoncontrolling interests that are redeemable and whose redemption is not solelycontrolled by the issuer are not within the scope of SFAS 160.  Such interests are within the scope of EITFD-98, which requires that redeemable noncontrolling interests be classifiedoutside of permanent equity at the aggregate of the redemption value andundistributed earnings attributable to the noncontrolling interest at eachbalance sheet date.  The effective dateof EITF D-98 is the Company’s fiscal year beginning January 1, 2009.  Janus has not yet completed an assessment ofthe impact of SFAS 160 and EITF D-98.

 

In February 2008,the FASB issued Staff Position 157-2, “Effective Date of FASB 157” (“FSP 157-2”)which deferred the provisions of Statement of Financial Accounting Standard No. 157,“Fair Value Measurements” (“SFAS 157”) to annual periods beginning after November 15,2008 for nonfinancial assets and liabilities. The application of the provisions of SFAS 157 to Janus’ nonfinancialassets and liabilities will likely result in additional disclosures but is notexpected to have a material impact on Janus’ fair value measurements.

 

In October 2008,the FASB issued Staff Position 157-3, “Determining the Fair Value of aFinancial Asset in a Market That Is Not Active” (“FSP 157-3”), which clarifiesthe application of SFAS 157 in an inactive market and provides an illustrativeexample to demonstrate how the fair value of a financial asset is determinedwhen the market for that financial asset is not active.  The guidance provided by FSP 157-3 is consistentwith Janus’ approach to valuing financial assets for which there are no activemarkets, including its investment in securities issued by Stanfield VictoriaFunding LLC (“Stanfield securities”).

 

In March 2008, theFASB issued Statement of Financial Accounting Standard No. 161, “Disclosuresabout Derivative Instruments and Hedging Activities, an amendment of FASBStatement No. 133” (“SFAS 161”), which requires enhanced 

 

5

----

 

disclosures about anentity’s derivative and hedging activities. The effective date of SFAS 161 is the Company’s fiscal year beginning January 1,2009.  Janus has not yet completed anassessment of the impact of SFAS 161.

 

**Note 3 – Earnings Per Share**

 

Basic earnings per commonshare is calculated by dividing net income by the weighted average number ofcommon shares outstanding during the period. Diluted earnings per common share adjusts the weighted average sharesoutstanding by the dilutive impact of shares underlying stock options andunvested restricted stock awards.  Thefollowing is a summary of the earnings per share calculation *(in millions, except per share data)*:

 
| ** **                                                                                      | ** ** | **Three months ended** | ** ** | **Nine months ended** | ** ** |
|-------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                                                                      | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **                                                                                      | ** ** | **2008**                         | ** ** | **2007**                        | ** ** | **2008** | ** ** | **2007** | ** ** |
| Income from continuing operations                                                               |       | $ 26.0                      |       | $ 50.8                     |       | $ 130.6 |   | $ 140.4 |   |
| Loss from discontinued operations                                                               |       | (0.6                             | )          | (38.6                           | )          | (1.5 | ) | (43.8 | ) |
|                                                                                            |       |                             |       |                            |       |   |   |   |   |
| **Net income**                                                                                  |       | $ 25.4                      |       | $ 12.2                     |       | $ 129.1 |   | $ 96.6 |   |
|                                                                                            |       |                             |       |                            |       |   |   |   |   |
| **Basic earnings per share**                                                                    |       |                             |       |                            |       |   |   |   |   |
| Weighted average common shares outstanding                                                      |       | 157.1                            |       | 171.2                           |       | 160.0 |   | 179.5 |   |
|                                                                                            |       |                             |       |                            |       |   |   |   |   |
| Income from continuing operations                                                               |       | $ 0.17                      |       | $ 0.30                     |       | $ 0.82 |   | $ 0.78 |   |
| Loss from discontinued operations                                                               |       | —                           |       | (0.23                           | )          | (0.01 | ) | (0.24 | ) |
|                                                                                            |       |                             |       |                            |       |   |   |   |   |
| Basic earnings per share                                                                        |       | $ 0.17                      |       | $ 0.07                     |       | $ 0.81 |   | $ 0.54 |   |
|                                                                                            |       |                             |       |                            |       |   |   |   |   |
| **Diluted earnings per share**                                                                  |       |                             |       |                            |       |   |   |   |   |
| Weighted average common shares outstanding                                                      |       | 157.1                            |       | 171.2                           |       | 160.0 |   | 179.5 |   |
|                                                                                            |       |                             |       |                            |       |   |   |   |   |
| Dilutive effect of stock options and  unvested restricted stock using the treasury stock method |       | 2.5                              |       | 2.7                             |       | 2.4 |   | 2.0 |   |
| Weighted average diluted common shares  outstanding                                             |       | 159.6                            |       | 173.9                           |       | 162.4 |   | 181.5 |   |
| Income from continuing operations                                                               |       | $ 0.16                      |       | $ 0.29                     |       | $ 0.80 |   | $ 0.77 |   |
| Loss from discontinued operations                                                               |       | —                           |       | (0.22                           | )          | (0.01 | ) | (0.24 | ) |
|                                                                                            |       |                             |       |                            |       |   |   |   |   |
| Diluted earnings per share                                                                      |       | $ 0.16                      |       | $ 0.07                     |       | $ 0.79 |   | $ 0.53 |   |

 

The following stock options and unvested restrictedstock are anti-dilutive and have not been included in the weighted averagediluted shares outstanding calculation *(in millions)*:

 
| ** **                | ** ** | **Three months ended** | ** ** | **Nine months ended** | ** ** |
|---------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **                | ** ** | **2008**                         | ** ** | **2007**                        | ** ** | **2008** | ** ** | **2007** | ** ** |
| Stock options             |       | 4.0                              |       | 3.3                             |       | 3.6 |   | 5.3 |   |
| Unvested restricted stock |       | —                           |       | —                          |       | 0.1 |   | — |   |

 

**Note 4 – Acquisitions**

 

***INTECH***

 

Each fiscal year through2012, each of the two founding members of Enhanced Investment Technologies, LLC(“INTECH”) has the option to require Janus to purchase from him an ownershipinterest of up to approximately 1.5% in INTECH at the fair market value of suchinterest.  On March 31, 2008, thetwo INTECH founding members exercised their rights and Janus increased itsownership of INTECH to approximately 89.5% by purchasing an additional 3%interest for $60.7 million in cash.  Thepro forma results of operations have not been presented as they would not havebeen materially different from reported amounts.  The preliminary purchase price allocationsresulted in the recognition of $23.7 million of intangible assets and $37.0million of goodwill.  Intangible assetsrepresent customer relationships and are preliminarily being amortized over 12years.

 

6

----

 

***Perkins, Wolf, McDonnell &Company, LLC (“PWM”)***

 

OnJuly 7, 2008, Janus agreed to purchase an additional 50% interest in PWMfor $90.0 million in cash.  Janus currently holds a 30% interest in PWM,which specializes in fundamental value-disciplined investing and is the namedsubadvisor of Janus’ small- and mid-cap value products.  The additionalinterest in PWM will facilitate the build-out of Janus’ value investmentproduct offerings.  Pending the satisfaction of customary conditionsincluding the approval of the change in control of PWM by regulators and Janus’value mutual fund shareholders, the acquisition is expected to close in thefourth quarter 2008.

 

Uponclosing the transaction, PWM will grant profit interest awards designed toretain and incentivize key employees to grow the business. These awards vest onthe fifth anniversary of grant and are generally entitled to a total of 5% ofPWM’s annual net income.  In addition,these awards have a formula-driven terminal value based on revenue growth and relativeinvestment performance of products managed by PWM.  Janus can terminateany or all of the awards: (i) on the fifth, seventh or each subsequentanniversary of grant by paying the relevant portion of the formula-basedterminal value, or (ii) prior to the fifth anniversary of grant if theformula yields a terminal value of $40.0 million.  Participants canrequire Janus to terminate the awards in exchange for the then-applicableformula price on the sixth anniversary of grant.  The profit interests arealso subject to termination at premiums or discounts to the formula at theoption of Janus or the relevant employee, as applicable, upon certain corporateor employment-related events affecting PWM or the relevant employee.  Compensation expense for these awards will berecognized over the vesting period based on the results of the application ofthe terminal value formula at the end of each relevant reporting period.

 

Janusalso has the option to acquire any or all of the remaining 20% interest of PWMat fair value on the third, fifth, seventh or each subsequent anniversary ofclosing. The minority owners of PWM have the option to require Janus topurchase any or all of their remaining interests on the fourth or sixthanniversary of closing at fair value.

 

**Note 5 –Discontinued Operations**

 

Duringthe second quarter 2008, Janus disposed of its Printing and Fulfillmentoperations for $14.5 million.  Theliquidation of the remaining assets is not expected to have a material impacton Janus’ operating results in future periods.

 

**Note 6 –Adoption of New Accounting Principle**

 

Janusadopted the provisions of SFAS 157 on January 1, 2008.  SFAS 157 defines fair value as the price thatwould be received to sell an asset or paid to transfer a liability in anorderly transaction between market participants at the measurement date.  SFAS 157 also establishes a framework formeasuring fair value and a valuation hierarchy based upon the transparency ofinputs used in the valuation of an asset or liability.  Classification within the hierarchy is basedupon the lowest level of input that is significant to the fair valuemeasurement. The valuation hierarchy contains three levels:

 

·                  Level1 – Valuation inputs are unadjusted quoted market prices for identical assetsor liabilities in active markets.

·                  Level2 – Valuation inputs are quoted prices for identical assets or liabilities inmarkets that are not active, quoted market                  pricesfor similar assets and liabilities in active markets and other observable inputsdirectly or indirectly related to                  theasset or liability being measured.

·                  Level3 – Valuation inputs are unobservable and significant to the fair valuemeasurement.

 

Thefollowing table presents the marketable securities carried at fair value as of September 30,2008 *(in millions)*:

 
| ** **                               | ** ** | **Level 1** | ** ** | **Level 2** | ** ** | **Level 3** | ** ** |
|------------------------------------------|------------|------------------|------------|------------------|------------|------------------|------------|
| Trading securities                       |       | $ 86.8      |       | $ —    |       | $ —    |       |
|                                     |       |             |       |             |       |             |       |
| Available-for-sale securities            |       |             |       |             |       |             |       |
| Investments in advised funds             |       | 12.6             |       | —           |       | —           |       |
| Structured investment vehicle securities |       | —           |       | —           |       | 69.3             |       |
|                                     |       |             |       |             |       |             |       |
| Other assets                             |       |             |       |             |       |             |       |
| Mutual fund unit award hedge asset       |       | 35.5             |       | —           |       | —           |       |
| Deferred compensation hedge asset        |       | 6.0              |       | —           |       | —           |       |
|                                     |       |             |       |             |       |             |       |
| Total assets at fair value               |       | $ 140.9     |       | $ —    |       | $ 69.3      |       |

 

7

----

 

Janus’Level 1 fair value measurements consist of exchange-traded equity and debtsecurities underlying separate accounts and consolidated mutual funds, andmutual fund securities.

 

Janus’Level 3 fair value measurements consist of the Stanfield securities which wereissued by a structured investment vehicle that purchased high grade medium- andlong-term fixed-income instruments financed by issuing low-cost, short-termsenior debt instruments such as asset-backed commercial paper and asset-backedmedium-term notes.  To measure fairvalue, Janus undertook a detailed analysis of the assets underlying theStanfield securities and benchmarked those assets against instruments of asimilar type with comparable yields, maturities and credit ratings for whichquoted market prices are readily available. Discounts have been applied to the quoted market prices of the benchmarkinstruments to adjust for varying yields, credit ratings or other distinguishingcharacteristics.  The valuation methodologyfor the Stanfield securities has been consistently applied.  Because of the significance of theunobservable inputs in Janus’ analysis, the fair value measurement of theStanfield securities has been classified as Level 3.  There were no other securities classified asLevel 3 during the three and nine months ended September 30, 2008.

 

Janusmeasured the fair value of the Stanfield securities as of September 30,2008, and determined that the valuation had declined from the previouslyreported amount of $90.3 million as of June 30, 2008.  As a result, Janus recognized a $21.0 millionimpairment charge in investment gains (losses), net.  The decline in value was primarily caused bya general deterioration in overall market conditions, particularly in financialinstitution-related debt, and the portfolio custodian’s establishment of areserve for litigation and operating expenses.

 

Thefollowing table presents the change in fair value of the Stanfield securities *(in millions)*:

 
| Estimated fair value at June 30, 2008       |   | $ 90.3 |   |
|--------------------------------------------------|--------|-------------|--------|
|                                             |   |        |   |
| Total losses                                     |   |        |   |
| Included in net income                           |   | (21.0       | )      |
| Included in other comprehensive income           |   | —      |   |
|                                             |   |        |   |
| Estimated fair value at September 30,  2008 |   | $ 69.3 |   |

 

Janusalso uses fair value measurements for business acquisitions and impairmenttesting of tangible and intangible assets. However, the application of SFAS 157 to fair value measurements oftangible and intangible assets has been postponed in accordance with FSP 157-2.

 

**Note 7 –Seed Capital Investments**

 

Janusperiodically adds new investment strategies to its mutual fund and otherproduct offerings (collectively referred to herein as “investment products”) byproviding the initial cash investment or “seeding” of these investmentproducts.  Seeded investment products areinitially consolidated and the individual securities within the portfolio areaccounted for as trading securities. Janus will consolidate such investment products as long as it holds acontrolling interest, defined as greater than 50% ownership.  Upon deconsolidation, Janus accounts for itsinvestments as available-for-sale securities.

 

Janusmay redeem invested seed capital for a variety of reasons, including whenthird-party capital invested in the relevant product is sufficient to sustainthe given investment strategy.  Janusrecognized $1.6 million and $0.4 million of gains from the redemption of seedcapital investments for the nine months ended September 30, 2008 and 2007,respectively.  There were no redemptionsof seed capital investments for the three months ended September 30, 2008and 2007.

 

Investmentsin seed capital are classified as follows:

 

***Trading Securities***

 

AtSeptember 30, 2008, seed capital investments classified as tradingsecurities totaled $86.8 million. Trading securities are carried in Janus’ consolidated financialstatements at fair market value, with changes in value recognized as gains andlosses currently in earnings.  Janusrecognized losses of $11.3 million and $19.4 million in earnings on securitiesclassified as trading, for the three- and nine-month periods ended September 30,2008, respectively.

 

***Available-for-Sale Securities***

 

AtSeptember 30, 2008, seed capital investments classified asavailable-for-sale totaled $12.6 million. Available-for-sale securities are carried in Janus’ consolidatedfinancial statements at fair market value, with changes in value recognized as 

 

8

----

 

gainsand losses in other comprehensive income. Accumulated gains and losses are reclassified to earnings when thesecurities are sold.  Janus periodicallyreviews the carrying value of available-for-sale securities for impairment byevaluating the nature, duration and extent of any decline in fair value.  If the decline in value is determined to beother-than-temporary, the carrying value of the security is written down tofair value through earnings. No impairment charges have been recognized duringthe three- and nine-month periods ended September 30, 2008 and 2007.

 

Priorto the fourth quarter 2007, Janus accounted for all seed account investments asavailable-for-sale securities with unrealized gains and losses recorded as acomponent of other comprehensive income. In the fourth quarter 2007, Janus evaluated its seed capital investmentsand determined that investment products in which Janus owns a majority interestshould be consolidated with changes in value recognized as gains and losses inearnings.  Janus assessed the impact to2007 and prior years under Staff Accounting Bulletin (“SAB”) Topic 1M “Materiality”and SAB 108 “Quantifying Misstatements” and concluded that the impact was notquantitatively material to 2007 results in the aggregate or any individualprevious year.  Janus reclassified the$17.6 million of unrealized gains associated with seed capital investments into2007 earnings.

 

**Note 8 –Long-Term Incentive Compensation**

 

Janusgranted $83.9 million in long-term incentive awards during the first ninemonths of 2008, which will generally be recognized ratably over a three-yearperiod and are not subject to performance-based accelerated vesting.  The 2008 awards consisted of $29.5 million ofrestricted stock (1.0 million shares at a weighted average price of $27.60 pershare), $20.5 million of stock options and $33.9 million of mutual fund units.

 

Atotal of 2.1 million stock options with a grant date fair value of $10.02 peroption were awarded as part of the February 2008 grant.  The grant date fair value of stock optionswas determined using the Black-Scholes model with the following assumptions:expected volatility of 32%, dividend yield of 0.13%, risk-free interest rate of2.81% and an expected life of five years.

 

Inaddition to the grants described above, retention grants were awarded tocertain Janus investment team members and certain INTECH employees tofacilitate succession planning and incentivize key personnel to remain with theCompany.  The Janus investment teamretention grant totaled $21.0 million (0.7 million shares of restricted stockat $28.83 per share) and will be recognized ratably over a four-yearperiod.  The INTECH retention granttotaled $10.0 million and will be recognized ratably over a ten-yearperiod.  The retention grants are notsubject to performance-based accelerated vesting.

 

**Note 9 –Other Income, Net**

 

Thecomponents of other income are as follows *(in millions)*:

 
| ** **      | ** ** | **Three months ended** | ** ** | **Nine months ended** | ** ** |
|-----------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **      | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **      | ** ** | **2008**                         | ** ** | **2007**                        | ** ** | **2008** | ** ** | **2007** | ** ** |
| Dividend income |       | $ 0.4                       |       | $ 5.9                      |       | $ 1.2 |   | $ 11.8 |   |
| Interest income |       | 1.2                              |       | 2.5                             |       | 5.1 |   | 6.8 |   |
| Other, net      |       | (0.2                             | )          | —                          |       | 0.3 |   | — |   |
| Total           |       | $ 1.4                       |       | $ 8.4                      |       | $ 6.6 |   | $ 18.6 |   |

 

**Note 10 – Income Taxes**

 

Janus’ statutory tax rate will decrease by approximately 1% from thecurrent rate of 38.25% effective January 1, 2009 as a result of alegislative change in Colorado state income taxes enacted during the secondquarter 2008.  A net benefit of $10.8million was recognized during the second quarter 2008 as a result of applyingthe estimated lower rate to deferred tax assets and liabilities expected to berealized or settled on or after the effective date of the change in taxes.

 

9

----

 

**Note 11 – Legal Proceedings**

 

Janus is subject tovarious legal proceedings arising from normal business operations. Althoughthere can be no assurances, based on information currently available,management believes that it is probable that the ultimate outcome of each ofthe actions described below will not have a material adverse effect on Janus’consolidated financial condition. However, an adverse outcome in any of theactions could have a material adverse effect on the Company’s financial resultsin the period in which it is recorded. As of September 30, 2008, Janus hadno litigation reserves as management believes that the claims made in the civilactions described below have little or no merit and intends to defend againstthem.

 

***Market Timing Litigation***

 

Followingthe market timing investigations by the New York Attorney General (“NYAG”) andthe SEC in 2003, Janus and certain affiliates were named as defendants in aconsolidated lawsuit in the U.S. District Court in Baltimore, Maryland (*Case No. MDL No. 1586, 04-MD-15863*).  Five amended complaints were filed in thesecoordinated proceedings, including: (i) claims by a putative class ofJanus fund investors asserting claims on behalf of the investor class (*Marini, et al. v. Janus Investment Fund, et al., U.S. District Court,District of Maryland, Case No. 04-CV-00497*);  (ii) derivative claims by investors inthe Janus funds ostensibly on behalf of the Janus funds (*Steinberg etal. v. Janus Capital Management, LLC et al., U.S. District Court, District ofMaryland, Case No. 04-CV-00518*); (iii) claims on behalf ofparticipants in the Janus 401(k) plan (*Wangberger v. JanusCapital Group Inc., 401(k) Advisory Committee, et al., U.S. DistrictCourt, District of Maryland, Case No. JFM-05-2711*); (iv) claimsbrought on behalf of shareholders of Janus on a derivative basis against Janus’Board of Directors (*Chasen v. Whiston, et al.,U.S. District Court, District of Maryland, Case No. 04-MD-00855*);and (v) claims by a putative class of Janus shareholders asserting claimson behalf of the shareholders (*Wiggins, et al. v. JanusCapital Group Inc., et al.*, *U.S. District Court,District of Maryland, Case No. 04-CV-00818).*

 

InAugust 2005, the U.S. District Court entered orders dismissing most of theclaims asserted against the Company and its affiliates by fund investors in the*Marini* and *Steinberg*cases described above, except certain claims under Section 10(b) ofthe Securities Exchange Act of 1934 and under Section 36(b) of theInvestment Company Act of 1940.  Janus’Motion for Summary Judgment requesting dismissal of the remaining claims iscurrently pending.  The U.S. DistrictCourt also entered an order dismissing all claims in the *Wiggins*lawsuit.  Plaintiffs have appealed thatdismissal to the U.S. Court of Appeals for the Fourth Circuit.  That appeal is currently pending.  In August 2006, the U.S. District Courtin the *Wangberger* 401(k) plan class actiondismissed the action with prejudice, and the plaintiff appealed the dismissalto the U.S. Court of Appeals for the Fourth Circuit.  In June 2008, the Fourth Circuitreversed the U.S. District Court’s order of dismissal and remanded the case forfurther proceedings.  Finally, the U.S.District Court also dismissed the *Chasen* lawsuitagainst Janus’ Board of Directors without leave to amend, ruling that theplaintiff had failed to make a pre-suit demand on the Board of Directors asrequired by applicable state law. The time to appeal this dismissal hasexpired.  As a result of the aboveevents, the Company and Janus Capital Management LLC are the remainingdefendants, in some capacity, in one or more of the actions described in thepreceding paragraph.

 

TheAuditor of the State of West Virginia, in his capacity as securitiescommissioner, initiated administrative proceedings against many of thedefendants in the market timing cases (including Janus) and seeks disgorgementand other monetary relief based on similar market timing allegations (*In the Matter of Janus Capital Group Inc. et al., Before the SecuritiesCommissioner, State of West Virginia, Summary Order No. 05-1320*).  In September 2006, Janus filed itsanswer to the Auditor’s summary order instituting proceedings, and requested ahearing.  A hearing was held in June 2007during which the parties were ordered to submit a scheduling order.  The court has not yet entered a casemanagement order in this matter.  Inaddition to the currently pending Motion to Discharge Order to Show Cause,Janus continues to challenge the statutory authority of the Auditor to bringsuch an action.

 

***Miscellaneous Proceedings***

 

During 2007, two formerportfolio managers filed suit against a Janus subsidiary alleging that itimplemented certain changes to their compensation arrangements in violation ofprior agreements *(Edward Keely v. Janus Management HoldingsCorporation, Denver District Court, Case No. 2007 CV 7366* and *Tom Malley v. Janus Management Holdings Corporation, Denver DistrictCourt, Case No. 2007 CV 10719)*. Janus answered the complaints, denying any liability and challenging themerits of Mr. Keely’s and Mr. Malley’s allegations.  Mr. Keely subsequently amended hiscomplaint adding further claims for relief, all which were denied byJanus.  Trial for the suit brought by Mr. Keelywas set to commence in October 2008 but has been postponed.  A new trial date has not been set.  Mr. Malley’s trial is scheduled tocommence in December 2008.

 

10

----

 

**Item2.     Management’s Discussion andAnalysis of Financial Condition and Results of Operations**

 

**FORWARD-LOOKINGSTATEMENTS**

 

*ThisQuarterly Report on Form 10-Q contains “forward-looking statements” withinthe meaning of the Private Securities Litigation Reform Act of 1995.  In addition, Janus Capital Group Inc.(collectively, “Janus” or the “Company”) may make other written and oralcommunications from time to time that contain such statements.  Forward-looking statements include statementsas to industry trends and future expectations of the Company and other mattersthat do not relate strictly to historical facts and are based on certainassumptions by management.  Thesestatements are often identified by the use of words such as “may,” “will,” “expect,”“believe,” “anticipate,” “intend,” “could,” “should,” “estimate” or “continue,”and similar expressions or variations. These statements are based on the beliefs and assumptions of the Companymanagement based on information currently available to management.  Such forward-looking statements are subjectto risks, uncertainties and other factors that could cause actual results todiffer materially from future results expressed or implied by such forward-lookingstatements. Important factors that could cause actual results to differmaterially from the forward-looking statements include, among others, the risksdescribed in the Company’s filings with the Securities and Exchange Commission,including those in Part I, Item 1A, Risk Factors, and elsewhere in Janus’Annual Report on Form 10-K for the year ended December 31, 2007 andin Part II, Item 1A, Risk Factors, in this Form 10-Q.  Janus cautions readers to carefully considersuch factors.  Furthermore, suchforward-looking statements speak only as of the date on which such statementsare made.  Except as required byapplicable law, Janus undertakes no obligation to update any forward-lookingstatements to reflect events or circumstances after the date of suchstatements.*

 

**AVAILABLEINFORMATION**

 

Copiesof Janus Capital Group Inc.’s (collectively, “Janus” or the “Company”) filingswith the Securities and Exchange Commission (“SEC”) can be obtained from theSEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C.20549.  Information can be obtained aboutthe operation of the Public Reference Room by calling the SEC at1-800-SEC-0330.  The SEC also maintainsan Internet site that contains reports, proxy and information statements, andother information regarding issuers that file electronically with the SEC athttp://www.sec.gov.

 

Janusmakes available free of charge its annual reports on Form 10-K, quarterlyreports on Form 10-Q and current reports on Form 8-K and amendmentsthereto as soon as reasonably practical after such filing has been made withthe SEC.  Reports may be obtained throughthe Investor Relations section of Janus’ website (http://ir.janus.com) or bycontacting Janus at (888) 834-2536. The contents of Janus’ website are not incorporated herein for anypurpose.

 

Janus’Officer Code of Ethics for Principal Executive Officer and Senior FinancialOfficers (including its chief executive officer, chief financial officer andcontroller) (the “Officer Code”); Corporate Code of Business Conduct and Ethicsfor all employees; corporate governance guidelines; and the charters of keycommittees of the Board of Directors (including the Audit, Compensation,Nominating and Corporate Governance, and Planning and Strategy committees) areavailable on its website (http://ir.janus.com/governance.cfm), and printedcopies are available to any shareholder upon request by calling Janus at (888)834-2536.  Any future amendments to or waivers of the Officer Code will beposted to the Investor Relations section of Janus’ website.

 

**RESULTSOF OPERATIONS**

** **

**Overview**

 

Janusprovides investment management and administrative services to mutual funds,separate accounts and institutional clients in both domestic and internationalmarkets through its primary subsidiaries, Janus Capital Management LLC (“Janusex-INTECH”) and Enhanced Investment Technologies, LLC (“INTECH”).

 

Revenuesare generally based upon a percentage of the market value of assets undermanagement and are calculated as a percentage of the daily average assetbalance in accordance with contractual agreements with the Company’s mutualfunds, separate accounts and subadvised relationships (collectively referred toherein as “investment products”). Certain investment products are also subject to performance fees thatvary based on their relative performance as compared to a benchmark index andthe level of assets subject to such fees. Assets under management primarily consist of domestic and internationalequity and debt securities.  Accordingly,fluctuations in the financial markets, relative investment performance, salesand redemptions of investment products, and changes in the composition ofassets under management are all factors that have a direct effect on Janus’operating results.

 

11

----

 

**INVESTMENTMANAGEMENT OPERATIONS (CONTINUING OPERATIONS)**

 

**RecentDevelopments**

 

Globalmarkets declined 20% to 30% through September 30, 2008 and 20% from theend of the third quarter 2008.  Thecontinuing deterioration in market conditions and Janus’ assets undermanagement will place pressure on the company’s operating margin and results inthe fourth quarter 2008 and into 2009. If the current market conditions persist or further deteriorate, Janus’assets under management, revenues, operating margin, net income and liquiditywill be materially impacted.

 

Toalign the Company’s cost structure with the current level of assets undermanagement and revenues, Janus anticipates reducing 2009 fixed anddiscretionary costs by approximately $40 million to $45 million.  The cost savings are expected to be achievedthrough an approximate 9% workforce reduction, yielding $15 million ofannualized savings, and cutting general and administrative expenses byapproximately $25 million to $30 million. In connection with the workforce reduction, Janus will incur a severancecharge of approximately $7 million during the fourth quarter 2008.  In addition, variable compensation anddistribution expenses are expected to fluctuate with assets under managementand revenues.

 

**ThirdQuarter 2008 Summary**

 

·                  Relative long-term investment performanceremained strong despite short-term underperformance, with approximately 65%,75% and 83% of Janus’ mutual funds in the top half of their Lipper categorieson a one-, three- and five-year total return basis, respectively, as of September 30,2008.

·                  INTECH’s long-term performance remainedstrong, with 83%, 56%, 100% and 100% of product strategies with at least aone-, three-, five- and ten-year performance track record, respectively;outperforming their respective benchmarks during each of those periods ended September 30,2008.

·                  Operating margin was 33.9%.

·                  Net income from continuing operations was$26.0 million, or $0.16 per diluted share.

·                  Repurchased 3.0 million shares of Januscommon stock at a total price of $71.9 million.

 

12

----

 

**AssetsUnder Management and Flows**

 
| ** **                      | ** ** | **Three months ended September 30,** | ** ** | **Nine months ended September 30,** | ** ** |
|---------------------------------|------------|----------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                      | ** ** | **2008**                                                 | ** ** | **2007**                                                | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                      | ** ** | **(in billions)**                                   | ** ** | **(in billions)**                                  | ** ** |
|                            |       |                                                     |       |                                                    |       |   |   |   |   |
| Beginning of period assets      |       | $ 191.8                                             |       | $ 190.6                                            |       | $ 206.7 |   | $ 167.7 |   |
| Long-term sales                 |       |                                                     |       |                                                    |       |   |   |   |   |
| Janus ex-INTECH                 |       | 8.5                                                      |       | 9.2                                                     |       | 29.7 |   | 24.4 |   |
| INTECH                          |       | 6.2                                                      |       | 2.0                                                     |       | 10.5 |   | 11.5 |   |
| Long-term redemptions           |       |                                                     |       |                                                    |       |   |   |   |   |
| Janus ex-INTECH                 |       | (9.8                                                     | )          | (6.3                                                    | )          | (26.6 | ) | (20.0 | ) |
| INTECH                          |       | (6.0                                                     | )          | (4.2                                                    | )          | (11.2 | ) | (9.4 | ) |
| Long-term net flows *           |       |                                                     |       |                                                    |       |   |   |   |   |
| Janus ex-INTECH                 |       | (1.3                                                     | )          | 2.9                                                     |       | 3.1 |   | 4.4 |   |
| INTECH                          |       | 0.2                                                      |       | (2.2                                                    | )          | (0.7 | ) | 2.1 |   |
| Total long-term net flows       |       | (1.1                                                     | )          | 0.7                                                     |       | 2.4 |   | 6.5 |   |
| Net money market flows          |       | (4.0                                                     | )          | 8.1                                                     |       | (5.0 | ) | 10.9 |   |
| Market / fund performance       |       | (26.2                                                    | )          | 8.6                                                     |       | (43.6 | ) | 22.9 |   |
| End of period assets            |       | $ 160.5                                             |       | $ 208.0                                            |       | $ 160.5 |   | $ 208.0 |   |
|                            |       |                                                     |       |                                                    |       |   |   |   |   |
| Average assets under management |       |                                                     |       |                                                    |       |   |   |   |   |
| Janus ex-INTECH                 |       | $ 112.2                                             |       | $ 112.0                                            |       | $ 116.6 |   | $ 106.5 |   |
| INTECH                          |       | 59.5                                                     |       | 68.8                                                    |       | 62.5 |   | 67.6 |   |
| Money Market                    |       | 11.0                                                     |       | 12.7                                                    |       | 11.7 |   | 10.5 |   |
| Total                           |       | $ 182.7                                             |       | $ 193.5                                            |       | $ 190.8 |   | $ 184.6 |   |

 

----

* Excludes money market flows. Sales andredemptions of money market funds are presented net on a separate line due tothe short-term nature of the investments.

 

Janusex-INTECH long-term net flows declined by $4.2 billion and $1.3 billion for thethree- and nine-month periods ended September 30, 2008, respectively,largely from increased redemptions as a result of adverse marketconditions.  Average assets undermanagement for Janus ex-INTECH were comparable for the three months ended September 30,2008 and 2007, and increased for the nine months ended September 30, 2008as compared to the same period in the prior year.  The increase in year-to-date Janus ex-INTECHaverage assets under management was largely driven by positive long-term netflows.

 

INTECHlong-term net flows increased $2.4 billion for the three-month period ended September 30,2008, as compared to the same period in 2007 primarily as a result of anadditional funding from one large institutional client.  Year over year, INTECH long-term net flowsdeclined $2.8 billion from the relative underperformance of certain keyinvestment strategies in early 2008 and most of 2007 and clients reallocatingassets from INTECH to other investment strategies.   INTECH average assets under managementdecreased for the three- and nine-month periods ended September 30, 2008as compared to the same periods in the prior year.  The decline is primarily attributable tochallenging market conditions.  Therecent deterioration in market conditions occurred late in the third quarter2008 and accordingly, did not have a significant impact on average assets undermanagement for the nine months ended September 30, 2008.

 

**Resultsof Investment Management Operations**

 

##### ***Three Months Ended September 30, 2008, Compared withThree Months Ended September 30, 2007***

 

***Revenues***

 

Investmentmanagement fees decreased $9.6 million, or 4.2%, primarily as a result of the5.6% decrease in average assets under management.

 

13

----

 

Performancefee revenue is derived from certain mutual funds and separate accounts.  The $3.7 million increase in performance feerevenue was principally due to higher fees earned on INTECH separate accountsas a result of improved recent relative investment performance.

 

Shareownerservicing fees and other revenue declined $3.3 million, or 6.5%, over thecomparable prior year period primarily as a result of a decrease in transferagent fees.  Transfer agent fees arebased on average assets under management in Janus’ retail fund series (JanusInvestment Fund), excluding money market assets, which decreased 8.8% over thecomparable prior period.

 

***Expenses***

 

Employeecompensation and benefits decreased $9.9 million, or 10.9%, due to lowerinvestment team compensation and sales commissions.  Investment team compensation decreased as aresult of a decline in short-term relative investment performance and lowerrevenue.  The investment teamcompensation plan is linked to individual investment performance, but also tiesthe aggregate level of compensation to revenue. Sales commissions decreased $3.8 million due to lower sales.

 

Long-termincentive compensation decreased quarter over quarter primarily as a result ofa decline in the performance-based acceleration of previous awards based onexpected 2008 financial performance, partially offset by an increase related tothe 2008 annual grant awarded in February.

 

Netinvestment losses of $32.3 million for the three months ended September 30,2008, include a $21.0 million impairment charge on structured investmentvehicle (“SIV”) securities caused by a general deterioration in overall marketconditions, particularly in financial institution-related debt held within thevehicle, and the SIV custodian’s establishment of a reserve for litigation andoperating expenses.  Investment lossesfor the quarter also include $11.3 million of mark-to-market adjustments on consolidatedinvestment products.  Mutual funds andseparate accounts in which Janus owns a majority interest are consolidated,with changes in market value reported in current period earnings.

 

Minorityinterest in consolidated earnings consists primarily of INTECH earnings whichdeclined as a result of lower average assets under management in the relevantinvestment products, offset by higher performance fees earned on separateaccounts.

 

##### ***Nine Months Ended September 30, 2008, Compared withNine Months Ended September 30, 2007***

 

***Revenues***

 

Investmentmanagement fees increased $34.2 million, or 5.3%, primarily as a result of the3.3% increase in average assets under management.  Revenue increased at a slightly higher ratethan average assets under management as a result of increased average assets inhigher yielding Janus ex-INTECH products.

 

Despitethe recent investment underperformance on certain investment products,performance fee revenue increased as a result of improved long-term relativeinvestment performance as of September 30, 2008, as compared to the sameperiod in 2007.

 

Shareownerservicing fees and other revenue increased $6.5 million, or 4.5%, from higherdistribution fees and transfer agent fees. Distribution fees are earned from the sale of Janus Adviser Series (“JAD”)C shares.  Such fees increased as aresult of higher sales of JAD C shares. Transfer agent fees were driven by an increase in Janus Investment Fundaverage assets under management.

 

***Expenses***

 

Employeecompensation and benefits was consistent with the comparable prior year periodas a result of a decline in investment team compensation and commissions,offset by an increase in the average number of employees.

 

Long-termincentive compensation decreased $14.2 million, or 28.7%, primarily as a resultof a decline in the performance-based acceleration of previous awards based onexpected 2008 financial performance, partially offset by an increase related tothe 2008 annual grant awarded in February. Grants made during the nine months ended September 30, 2008,totaled $83.9 million and will be recognized ratably over a three-yearperiod.  These awards are not subject toaccelerated vesting.

 

14

----

 

Inaddition to these awards, retention awards were granted to certain Janusinvestment team members and INTECH employees to facilitate succession planningand incentivize key personnel to remain with the Company.  The Janus retention grant totaled $21.0million and will be recognized ratably over a four-year period.  The INTECH retention grant totaled $10.0million and will be recognized ratably over a ten-year period.  These awards are not subject to acceleratedvesting.

 

Marketingand advertising expenses increased $7.9 million, or 47.6%, from sponsorshipsand higher print advertising associated with the promotion of the Janus brand.

 

Distributionexpense increased $10.5 million, or 10.4%, from a similar increase in assetsunder management subject to third-party concessions.  Distribution fees are calculated based on acontractual percentage of the market value of assets under managementdistributed through third-party intermediaries and are primarily related toJanus ex-INTECH investment products.

 

Depreciationand amortization expense increased $6.0 million, or 24.3%, primarily as aresult of the amortization of deferred commissions from higher sales of JAD Cshares and the amortization of intangibles related to the March 2008acquisition of an additional 3% interest in INTECH.

 

General,administrative and occupancy expense increased $17.0 million, or 18.9%, fromhigher legal and other professional services costs associated with ongoinglitigation and rent related to international expansion.  The comparable prior year period includes therelease of $6.3 million of legal reserves.

 

Janusperforms its annual impairment tests of goodwill and unamortized intangibleassets during the fourth quarter of each year. If assets under management continue to decline, Janus may recognize animpairment charge associated with its goodwill and intangible assets.

 

Interestexpense increased $16.7 million, or 41.9%, from the issuance of additional debtin June 2007.  All of Janus’outstanding debt includes an interest rate adjustment covenant that providesthat the interest rate payable will increase by 25 basis points for each levelthat the Company’s debt rating is decreased by Moody’s from its existing ratingof Baa3 or by S&P from its existing rating of BBB-, up to a maximumincrease of 200 basis points.  In theevent Janus’ assets under management continue to decline, Janus’ debt ratingsmay be downgraded and interest expense will increase.

 

Netinvestment losses of $38.8 million for the nine months ended September 30,2008 include a $21.0 million impairment charge on SIV securities and $19.4million of mark-to-market losses on consolidated investment products, net of$1.6 million of realized gains.

 

Thedecrease in minority interest is largely the result of a decline in INTECHearnings associated with lower average assets under management in the relevantinvestment products, offset by higher performance fees earned on separateaccounts.

 

Theincome tax provision for the nine months ended September 30, 2008,includes a $10.8 million tax benefit as a result of applying a lower tax rateto deferred tax assets and liabilities expected to be realized or settled on orafter January 1, 2009.  Janus’ taxrate will decrease by approximately 1% from the current rate effective January 1,2009 as a result of a legislative change in Colorado state taxes enacted duringthe second quarter 2008.

 

**DISCONTINUED OPERATIONS**

 

Duringthe second quarter 2008, Janus disposed of its Printing and Fulfillmentoperations for $14.5 million.  Theliquidation of the remaining assets is not expected to have a material impacton Janus’ operating results in future periods.

 

15

----

 

**LIQUIDITYAND CAPITAL RESOURCES**

 

**Cash Flows**

 

A summary of cash flow data from continuing operations for thenine-month periods ended September 30, 2008 and 2007 is as follows *(in millions)*:

 
| ** **                                                  | ** ** | **2008**     | ** ** | **2007**     | ** ** |
|-------------------------------------------------------------|------------|--------------|------------|--------------|------------|
| Cash flows provided by (used for): |       |         |       |         |       |
| Operating activities                                        |       | $ 168.1 |       | $ 203.8 |       |
| Investing activities                                        |       | (66.2        | )          | (36.2        | )          |
| Financing activities                                        |       | (285.0       | )          | (69.3        | )          |
| Net change in cash and cash equivalents                     |       | (183.1       | )          | 98.3         |       |
| Balance beginning of period                                 |       | 480.7        |       | 507.1        |       |
| Balance end of period                                       |       | $ 297.6 |       | $ 605.4 |       |

 

Onan annual basis, Janus’ cash flow from operations historically has beenpositive and sufficient to fund ordinary operations and capitalrequirements.  Cash provided by operatingactivities for the nine months ended September 30, 2008, decreased overthe comparable prior year period as a result of changes in working capitalitems, which can vary from period to period based on the timing of cashreceipts and payments.

 

Cashused for investing activities for the nine months ended September 30,2008, primarily represents $67.7 million for the purchase of an additional 3%interest in INTECH.  Cash used forinvesting activities for the comparable prior year period primarily representsthe acquisition of an additional 4% interest in INTECH and $58.4 million of netproceeds from the sale of investments.

 

Cashused for financing activities for the nine months ended September 30,2008, primarily represents stock buybacks of $289.8 million.  Cash provided by financing activities for thecomparable prior period includes $748.4 million of proceeds from the issuanceof long-term debt, offset by debt repayment of $158.1 million and stockbuybacks of $675.6 million.

 

**OtherSources of Liquidity**

 

*CreditFacility*

 

Janushas a $350 million Three-Year Competitive Advance and Revolving Credit FacilityAgreement (the “Credit Facility”) with a syndicate of banks.  The Credit Facility contains a number offinancial covenants including a specified financing leverage ratio and interestcoverage ratio.  At September 30,2008, Janus was in compliance with all covenants and there were no borrowingsunder the Credit Facility.  In the eventthat assets under management continue to decline, Janus may not be able toutilize all or a portion of its credit available under the Credit Facility.

 

*ShelfRegistration*

 

TheCompany has effective a Shelf Registration Statement with the SEC, under whichJanus could register the sale of an indeterminate amount of Janus’ commonstock, preferred stock and debt securities.

 

16

----

 

**CapitalRequirements**

 

***PWM***

 

OnJuly 7, 2008, Janus agreed to purchase an additional 50% interest in PWMfor $90.0 million in cash.  Janus currently holds a 30% interest in PWM,which specializes in fundamental value-disciplined investing and is the namedsubadvisor of Janus’ small- and mid-cap value products.  The additionalinterest in PWM will facilitate the build-out of Janus’ value investmentproduct offerings.  Pending the satisfaction of customary conditionsincluding the approval of the change in control of PWM by regulators and Janus’value mutual fund shareholders, the acquisition is expected to close in thefourth quarter 2008.

 

Uponclosing the transaction, PWM will grant profit interest awards designed toretain and incentivize key employees to grow the business. These awards vest onthe fifth anniversary of grant and are generally entitled to a total of 5% ofPWM’s annual net income.  In addition,these awards have a formula-driven terminal value based on revenue growth andrelative investment performance of products managed by PWM.  Janus canterminate any or all of the awards: (i) on the fifth, seventh or eachsubsequent anniversary of grant by paying the relevant portion of theformula-based terminal value, or (ii) prior to the fifth anniversary ofgrant if the formula yields a terminal value of $40.0 million. Participants can require Janus to terminate the awards in exchange for thethen-applicable formula price on the sixth anniversary of grant.  The profitinterests are also subject to termination at premiums or discounts to theformula at the option of Janus or the relevant employee, as applicable, uponcertain corporate or employment-related events affecting PWM or the relevantemployee.  Compensation expense for theseawards will be recognized over the vesting period based on the results of theapplication of the terminal value formula at the end of each relevant reportingperiod.

 

Janusalso has the option to acquire any or all of the remaining 20% interest of PWMat fair value on the third, fifth, seventh or each subsequent anniversary ofclosing. The minority owners of PWM have the option to require Janus topurchase any or all of their remaining interests on the fourth or sixthanniversary of closing at fair value.

 

***Money Market Funds Advised by the Company***

 

Janusadvises money market funds (the “Money Funds”) that attempt to provide currentincome and limit exposure to losses by investing in high-quality securitieswith short-term durations that present minimal credit risk.  Adverse events or circumstances related toindividual securities or the market in which the securities trade may causeother-than-temporary declines in value. Given recent market events impacting liquidity for mutual funds,including money market funds, Janus has enhanced its emphasis on managing theMoney Funds for capital preservation and liquidity in line with theirinvestment objectives.  The Money Fundshave also participated in the U.S. Department of Treasury’sTemporary Guarantee Program for money marketmutual funds (the “Program”).  TheProgram guarantees for shareholders of a Money Fund as of September 19,2008 the lesser of: (i) the amount the shareholder held as of the close ofbusiness on September 19, 2008; or (ii) the number of shares held asof the date that the Program is utilized. A Money Fund must be in liquidation to utilize the guarantee provided bythe Program, and currently none of the Money Funds are in liquidation.  The Program currently is only effective untilDecember 18, 2008.  Under certainsituations, Janus may elect to support one or more of the Money Funds to enablethem to maintain a net asset value equal to one dollar through a variety ofmeans, including but not limited to, purchasing securities held by the MoneyFunds, reimbursing for any losses incurred or providing a letter ofcredit.  However, Janus is notcontractually or legally obligated to provide support to the Money Funds.

 

Janus’decision to provide support to the Money Funds is based on the facts andcircumstances at the time a holding in the Money Funds becomes or is expectedto become distressed.  A holding isconsidered distressed when there is significant doubt regarding the issuer’sability to pay required amounts when due, often resulting in a decline in thesecurities’ credit ratings.  If asecurity falls below the minimum rating required by investment restrictions,the Money Funds must dispose of the investment unless the Money Funds’ board oftrustees determines that such disposition is not in the best interests of theMoney Funds.  In determining whether totake any action in response to a distressed condition or a downgrade affectingsecurities held by the Money Funds, Janus considers many factors, which mayinclude the potential financial and reputational impact to the Money Funds andJanus, the regulatory and operational restrictions, the size of a holding, asecurity’s expected time to maturity and likelihood of payment at maturity,general market conditions, discussions with the Money Funds’ board of trusteesand Janus’ board of directors, and Janus’ liquidity and financialcondition.  No single factor isdeterminative and there is no predetermined threshold with respect to eachfactor that would lead Janus to consider providing support to the Money Funds.

 

17

----

 

*FinancialSupport Provided to the Funds*

 

On December 21,2007, Moody’s Investors Service, Inc. downgraded securities issued bycertain SIVs including those issued by Stanfield Victoria Funding LLC (“Stanfieldsecurities”) to a rating below what is generally permitted to be held by theMoney Funds.  The Money Funds held $105.0million of Stanfield securities plus $3.5 million of accrued interest at thetime of the downgrade.  In connectionwith this downgrade, Janus determined that it was in the best interests of theapplicable Money Funds and their shareholders for Janus to purchase theStanfield securities from the Money Funds at amortized cost plus accruedinterest.  Subsequent to purchase, Janushas recognized impairment charges totaling $39.2 million (including $3.5million of purchased accrued interest), reflecting the difference between thelow end of the range of estimated fair value and the purchase price of theStanfield securities.  Included in Janus’estimate of fair value is the assumption that no interest income payable on thesecurities will be received.  Janus’total additional risk of loss with respect to the Stanfield securities islimited to the $69.3 million carrying value of its investment. Additionalimpairment charges on the Stanfield securities may be recognized if theunderlying assets experience further other-than-temporary deterioration in thevalue.

 

In January 2008,the Stanfield securities were placed with an enforcement manager to berestructured or sold at the election of each senior note holder.  Janus elected to participate in therestructuring of the Stanfield securities. In addition, the collateral agent, Deutsche Bank, filed an interpleadercomplaint due to conflicting positions of note holders that has effectivelyprevented the enforcement manager from making any cash payments and otherdistributions, or from restructuring the Stanfield securities, until the matteris resolved by the New York courts or is settled among the parties.

 

A resolution to theinterpleader complaint and an amendment to the Security Agreement for theStanfield securities are expected to be approved during the fourth quarter2008.  Under the amendment, Janus willreceive its proportionate share of available cash held in the portfolio and hasthe option of receiving its proportionate share of each asset underlying theStanfield securities or participating in a new structure that has not yet beendetermined.  Janus is currently evaluatingits options.

 

*Securities Held by the Funds*

 

Januscontinuously evaluates the securities held by the Money Funds to determine ifany holdings are distressed or may become distressed in the near future.  In such circumstances, Janus would considerwhether taking any action, including, but not limited to, a potential electionby Janus to provide further support to the Money Funds that could result inadditional impairments and financial losses, would be appropriate.

 

***INTECH***

 

Eachfiscal year through 2012, each of the two INTECH founding members has theoption to require Janus to purchase from him an ownership interest of up toapproximately 1.5% of INTECH (“Annual Option Shares”) at fair marketvalue.  Subsequent to the March 31,2008 sale of a 3% interest in INTECH to Janus by the founders, the two foundershave an aggregate ownership interest of approximately 8% in INTECH.  In the event that either INTECH founder doesnot fully exercise his annual voluntary sale option in a given year, Janus hasthe option to require the INTECH founder to sell the remaining balance of theAnnual Option Shares for that year at fair market value.

 

Inaddition, the founders can require Janus to purchase their INTECH interestswhen the founder’s employment is terminated. The purchase price of the departing founder’s INTECH interests will bebased on fair market value.  Each founderis entitled to retain approximately one percent of INTECH’s shares thenoutstanding after employment until his death unless he is terminated for causeor leaves voluntarily while not in good standing.  An INTECH founder will be deemed to be ingood standing if he voluntarily leaves on or after January 1, 2009, afterproviding 12 months’ prior notice and cooperation with the transition.  Janus has not recorded a liability for thepurchase of the outstanding INTECH interests due to the uncertainty of thisobligation and the price at which it may occur. Total INTECH interests held by the two founders would be valued atapproximately $128.0 million, based on the most recent determination of fairmarket value.

 

**Item3.     Quantitative and QualitativeDisclosures about Market Risk**

 

TheCompany has had no material changes in its exposure to market risks from thatpreviously reported in the Company’s Annual Report on Form 10-K for theyear ended December 31, 2007.

 

18

----

 

**Item 4.     Controls andProcedures**

 

Janus’management evaluated the effectiveness of the design and operation of itsdisclosure controls and procedures (as such term is defined in Rules 13a-15(e) and15d-15(e) under the Exchange Act) as of September 30, 2008.  Disclosure controls and procedures are thecontrols and other procedures that the Company designed to ensure that itrecords, processes, summarizes and reports in a timely manner the informationit must disclose in reports that it files with or submits to the SEC.  Gary D. Black, Chief Executive Officer, andGregory A. Frost, Executive Vice President and Chief Financial Officer,reviewed and participated in this evaluation. Based on this evaluation, Messrs. Black and Frost concluded that asof the date of their evaluation, Janus’ disclosure controls and procedures wereeffective.

 

Therehas been no change in Janus’ internal controls over financial reporting (assuch term is defined in Rules 13a-15(e) and 15d-15(e) under theExchange Act) during the three months ended September 30, 2008, that hasmaterially affected, or is reasonably likely to materially affect, Janus’internal controls over financial reporting.

 

**Item 5.     Other Information**

 

(a)  On October 21, 2008, Janus’ Board ofDirectors approved an amendment to Janus’ Bylaws (the “Amended and RestatedBylaws”).

 

·                  Eachof Article II, Section 3, governing submission of a proposal by astockholder, and Article III, Section 2, applicable in the case of anomination of a person for election as a director, of Janus’ Bylaws was amended(i) to require a stockholder to include the following additionalinformation in the advance notice to Janus: a description of any agreements thestockholder has with affiliates or third parties concerning the stockholderproposal or director nomination; a description of any derivative or shortpositions, profit interests, options, hedging transactions, and borrowed orloaned shares the stockholder has with respect to the Company’s stock; arepresentation that the stockholder is entitled to vote at the meeting andwhether or not he or she intends to attend the meeting to present the proposalor director nomination; and whether the stockholder intends to conduct a proxysolicitation; and (ii) to revise the period in which a stockholder maymake a proposal or nomination of a person election as a director to generallynot less than ninety (90) days nor more than one hundred twenty (120) daysprior to the anniversary date of the immediately preceding annual meeting ofstockholders;

 

·                  Article III of Janus’ Bylaws was alsoamended (i) to require a stockholder nominating a person for election as adirector to include in the advance notice certain biographical informationabout each director nominee as well as a questionnaire completed by eachdirector nominee that requires the nominee to disclose any voting commitmentsthe nominee may have with a third person and commit to tender a resignationfollowing such person’s failure to receive the required vote for election orreelection at the next meeting at which such person would face election orreelection; and (ii) to provide the date to determine whether the electionof directors at any meeting is by a majority of votes cast or a plurality ofthe shares represented in person or by proxy at such meeting is fourteen (14)days in advance of the date that Janus files with the Securities and ExchangeCommission its definitive proxy statement for such meeting;

 

·                  Article VI of Janus’ Bylaws was revisedto clarify and generally expand the ability of Janus’ Board of Directors toestablish committees thereof in its discretion; and

 

·                  Article VII of Janus’s Bylaws wasamended to provide for technical revisions to the certification of Janus’capital stock, the transfer thereof and the replacement of lost certificates.

 

Inaddition to these changes, the Amended and Restated Bylaws includenon-substantive changes to clarify or update certain provisions of Janus’Bylaws.

 

Shareholdersintending to present a proposal at Janus’ 2009 Annual Meeting but not includeit in Janus’ Proxy Statement, and shareholders intending to nominate a personfor election to Janus’ Board of Directors, must comply with the requirementsset forth in the Amended and Restated Bylaws.  The Amended and Restated Bylaws require,among other things, that a shareholder must submit a written notice of intentto present such a proposal or to make such a nomination and set forth otherinformation specified in the Amended and Restated Bylaws.  As a result of the amendment to Janus’ Bylawsdescribed above, the notice must be received by Janus’ Secretary no more than120 days and no less than 90 days prior to the anniversary ofthe immediately preceding year’s annual meeting.  Therefore, Janus’ Secretary must receive anysuch notice for the 2009 Annual Meeting no earlier than January 1, 2009and no later than January 31, 2009.  If the notice

 

19

----

 

isreceived before January 1, 2009, or after January 31, 2009,it will be considered untimely and Janus will not be required to present theproposal or nominee for voting at Janus’ 2009 Annual Meeting.  Janus reserves the right to reject, rule outof order or take other appropriate action with respect to any proposal ornomination that does not comply with these and other applicable requirements.

 

Theforegoing description of the Amended and Restated Bylaws is qualified in itsentirety by the Amended and Restated Bylaws, effective October 21, 2008,incorporated herein by reference as Exhibit 3.1 to this Quarterly Reporton Form 10-Q.

 

(b)   On October 21,2008, Janus’ Board of Directors adopted the Amended and Restated Bylaws, whichamong other things, revised certain of the procedures outlined in Janus’ mostrecent Proxy Statement by which shareholders may nominate a person for electionto the Janus Board of Directors.  Asummary of the revised procedures is set forth in Section (a) of thisItem 5.

 

20

----

 

**PART II – OTHER INFORMATION**

 

**Item 1.     Legal Proceedings**

 

SeePart I, Item 1. Financial Statements, Note 11 – Legal Proceedings.

 

**Item 1A.     Risk Factors**

 

TheCompany has had no material changes in its risk factors from those previouslyreported in the Company’s Annual Report on Form 10-K for the year ended December 31,2007 other than the following:

 

*Thevolatility and disruption of the capital and credit markets, and adversechanges in the global economy have negatively impacted Janus’ revenues.*

 

Thecapital and credit markets have been experiencing volatility and disruption formore than 12 months.  In recent weeks,the volatility and disruption has reached unprecedented levels.  The decline in global market conditions hasresulted, and may continue to result, in decreases in Janus’ assets undermanagement and revenues.  Such declinesmay adversely impact Janus’ operating results, financial condition, liquidity,credit ratings, ability to access capital markets, and retention and ability toattract key employees.  Adverse changesin these factors may limit Janus’ flexibility in planning for, or reacting to,changes in its operations and the financial industry overall.

 

**Item 2.     Unregistered Sales ofEquity Securities and Use of Proceeds**

 

On July 22, 2008, the Board ofDirectors authorized a fifth $500 million stock repurchase program to takeeffect when the current authorization is utilized.  During the first nine months of 2008, Janusrepurchased 10.8 million shares at an aggregate cost of $281.0 million underthe current authorization.  Given thecurrent market conditions, Janus is suspending stock buybacks to preserveliquidity.

 

Inaddition to this program, for the nine months ended September 30, 2008,Janus repurchased 321,346 shares from employees as a part of a sharewithholding program (established under Rule 10b5-1 of the SecuritiesExchange Act of 1934) to satisfy employees’ income tax liabilities attributableto the vesting of restricted stock awards.

 
| **Period** | ** ** | **(a) Total  Number of  Shares (or  Units)  Purchased** | ** ** | **(b) Average  Price Paid Per  Share (or Unit)** | ** ** | **(c) Total Number of  Shares (or Units)  Purchased as Part of  Publicly Announced Plans   or Programs** | ** ** | **(d) Maximum Number (or  Approximate Dollar Value) of  Shares (or Units) that May  Yet Be Purchased Under the  Plans or Programs (End of  Month)** | ** ** |
|------------|------------|------------------------------------------------------------------------|------------|---------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| January    |       | 2,098,252                                                              |       | $ 27.46                                                              |       | 2,096,800                                                                                                                                                            |       | $ 245 million                                                                                                                                                                                                                            |       |
| February   |       | 2,459,497                                                              |       | $ 25.57                                                              |       | 2,156,592                                                                                                                                                            |       | $ 190 million                                                                                                                                                                                                                            |       |
| March      |       | 955,693                                                                |       | $ 23.07                                                              |       | 955,693                                                                                                                                                              |       | $ 168 million                                                                                                                                                                                                                            |       |
| April      |       | 8,683                                                                  |       | $ 23.56                                                              |       | —                                                                                                                                                               |       | $ 168 million                                                                                                                                                                                                                            |       |
| May        |       | 554,600                                                                |       | $ 27.58                                                              |       | 554,600                                                                                                                                                              |       | $ 153 million                                                                                                                                                                                                                            |       |
| June       |       | 2,039,587                                                              |       | $ 29.29                                                              |       | 2,037,500                                                                                                                                                            |       | $ 93 million                                                                                                                                                                                                                             |       |
| July       |       | 1,635,919                                                              |       | $ 24.53                                                              |       | 1,629,700                                                                                                                                                            |       | $ 53 million                                                                                                                                                                                                                             |       |
| August     |       | 586,600                                                                |       | $ 25.10                                                              |       | 586,600                                                                                                                                                              |       | $ 38 million                                                                                                                                                                                                                             |       |
| September  |       | 737,800                                                                |       | $ 23.27                                                              |       | 737,800                                                                                                                                                              |       | $ 21 million                                                                                                                                                                                                                             |       |
| **Total**  | ** ** | **11,076,631**                                                         | ** ** | **$ 26.16**                                                          | ** ** | **10,755,285**                                                                                                                                                       | ** ** | ** **                                                                                                                                                                                                                                    | ** ** |

 

21

----

 

**Item 6.     Exhibits**

 
| 3.1    |   | Bylaws  of Janus Capital Group Inc. as Amended and Restated on October 21, 2008                                                                                                                                         |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                         |
| 10.1   |   | Janus  Capital Group Inc. Amended and Restated Income Deferral Program,effective January 22, 2008                                                                                                                       |
|   |   |                                                                                                                                                                                                                         |
| 10.2   |   | Janus  Capital Group Inc. Amended and Restated 2004 Employment Inducement Award  Plan, effective January 22, 2008                                                                                                       |
|   |   |                                                                                                                                                                                                                         |
| 10.3   |   | Janus  Capital Group Inc. Amended and Restated Director Deferred Fee Plan,effective October 20, 2008                                                                                                                    |
|   |   |                                                                                                                                                                                                                         |
| 31.1   |   | Certification  of Gary D. Black, Chief Executive Officer of Registrant                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                         |
| 31.2   |   | Certification  of Gregory A. Frost, Executive Vice President and Chief Financial Officer of  Registrant                                                                                                                      |
|   |   |                                                                                                                                                                                                                         |
| 32.1   |   | Certification  of Gary D. Black, Chief Executive Officer of Registrant, pursuant to 18  U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002                                 |
|   |   |                                                                                                                                                                                                                         |
| 32.2   |   | Certification  of Gregory A. Frost, Executive Vice President and Chief Financial Officer of  Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002 |
|   |   |                                                                                                                                                                                                                         |
| 99.1   |   | Lipper  Rankings                                                                                                                                                                                                             |

 

22

----

 

**SIGNATURES**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 
| Date:  October 23, 2008 |
|------------------------------|
|                         |
|                         |
|                         | Janus Capital Group Inc. |   |
|                         |   |   |
|                         |   |   |
|                         | /s/ Gary D. Black |   |
|                         | Gary D. Black, |   |
|                         | Chief Executive Officer |   |
|                         |   |   |
|                         |   |   |
|                         | /s/ Gregory A. Frost |   |
|                         | Gregory A. Frost, |   |
|                         | Executive Vice President and |   |
|                         | Chief Financial Officer |   |
|                         | (Principal Financial Officer) |   |
|                         |   |   |
|                         |   |   |
|                         | /s/ Robert W. Blakley |   |
|                         | Robert W. Blakley |   |
|                         | Vice President and Controller |   |
|                         | (Principal Accounting Officer) |   |

 

23

----

 

**JANUS CAPITAL GROUP INC.**

**INDEX TO EXHIBITS**

 
| **Exhibit   No.** | ** ** | **Document**                                                                                                                                                                                                                | ** ** | **Regulation S-K  Item 601(b)  Exhibit No.** |
|------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------|
| 3.1                    |       | Bylaws of Janus Capital Group Inc. as Amended and Restated on October 21,  2008                                                                                                                                        |       | 3                                                 |
|                   |       |                                                                                                                                                                                                                        |       |                                              |
| 10.1                   |       | Janus Capital Group Inc. Amended and Restated Income Deferral  Program, effective January 22, 2008                                                                                                                     |       | 10                                                |
|                   |       |                                                                                                                                                                                                                        |       |                                              |
| 10.2                   |       | Janus Capital Group Inc. Amended and Restated 2004 Employment  Inducement Award Plan, effective January 22, 2008                                                                                                       |       | 10                                                |
|                   |       |                                                                                                                                                                                                                        |       |                                              |
| 10.3                   |       | Janus Capital Group Inc. Amended and Restated Director Deferred Fee  Plan, effective October 20, 2008                                                                                                                  |       | 10                                                |
|                   |       |                                                                                                                                                                                                                        |       |                                              |
| 31.1                   |       | Certification of Gary D. Black, Chief Executive Officer of Registrant                                                                                                                                                       |       | 31                                                |
|                   |       |                                                                                                                                                                                                                        |       |                                              |
| 31.2                   |       | Certification of Gregory A. Frost, Executive Vice President and Chief  Financial Officer of Registrant                                                                                                                      |       | 31                                                |
|                   |       |                                                                                                                                                                                                                        |       |                                              |
| 32.1                   |       | Certification of Gary D. Black, Chief Executive Officer of  Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906  of the Sarbanes-Oxley Act of 2002                                 |       | 32                                                |
|                   |       |                                                                                                                                                                                                                        |       |                                              |
| 32.2                   |       | Certification of Gregory A. Frost, Executive Vice President and Chief  Financial Officer of Registrant, pursuant to 18 U.S.C. Section 1350, as  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |       | 32                                                |
|                   |       |                                                                                                                                                                                                                        |       |                                              |
| 99.1                   |       | Lipper Rankings                                                                                                                                                                                                             |       | 99                                                |

 

----